Posted by Robert on August 9, 2010
My thinking about retirement leads me to explore alternative visions to my preconceived notion. Maybe it’s possible to retire without quitting work. I have not read Timothy Ferris’ The 4 Hour Work Week, and I won’t, because the author strikes me as someone who takes himself too seriously. So I picked up Stanley Bing’s Executricks. I am told he has a similar message to Tim Ferris, but he is prepared to laugh at himself. I started skimming through it with every intention of immediately returning it to the library. By the time I realized it, I was on chapter 3.
The subtitle of the book is: How to Retire While You’re Still Working. With a tongue-in-cheek manner, Stanley Bing proceeds to illustrate spending company time and money on the good things in life. The reason, he suggests, is that retirement isn’t a dream come true. He presents two alternatives: either the poor schmuck works all his life and drops dead within six months of retirement, or who putters lonely through the last 30 years of life without the resources or network to really enjoy it. In this way, there is no longer a choice between being rich with time or being rich with money; the cunning executive can have it all.
“Retiring” while working requires control. You must use people to do your work for you, as much as possible. You can then use email and cell phones to delegate and communicate while living life outside the office. The author encourages the reader to legitimately expand unproductive time such as breakfast meetings and business lunches to replace tedious working hours. Then, using the expense account and sound business reasoning, travel for business with the goal of personal enjoyment. The irony is that you must work hard to develop the environment in which to hardly work.
The humour is obvious, but this fits into the category of “It’s funny because it’s true.” And it’s not possible to tell if he isn’t being honestly sociopathic at some level. At one point, he cites Machiavelli, with the suggestion that he was a fun-loving and pragmatic thinker. As an investor, I don’t want to ever think that people are abusing company resources in this way in companies that I own. Realistically, it’s accepted practice, and explains why I prefer to own small companies or family businesses.
The book ends on a serious note. Perhaps the inspiration for the entire book was a piece of advice the author received from his father-in-law, who made just enough by age 50 to be able to retire to a golf community in Florida. After 20 years, at age 70, he said to Stanley, “Never retire. Never.” The alternative to retiring while you work, that the author suggests, is philanthropy. In reality, tutoring, mentoring, volunteering, organizing and other forms of philanthropy are ways of working in retirement.
I am reminded of the admonition: “Be careful what you wish for; you might get it.” By age 45, will I really know what I want to do with the next 45 years of my life? Do I really want to limit my options? My answer is “No.” I want to continue working, so that I can maintain my social network and continue to benefit from more-than-adequate financial resources. I only want to have no debt and enough assets in the bank to be beholden to no one. Then I can be retired while working and truly enjoy the good things in life.
Posted by Tim Stobbs on July 14, 2010
My workplace recently changed its performance management and compensation practices to a new system. Basically in the new system there are four ranks you can get related to how well you meet your goals. If you get the top rank you can get an extra one or two percent raise compared with the rank below it. What struck me about the system when discussing it with a friend is that it doesn’t provide much motivation to go the extra mile. A 1 or 2% raise likely isn’t enough compensation for the amount of work you would need to do to achieve that top rank.
For example, if you earned $80,000 a year and did an extra half an hour of work a day over a year(~ 122.5 hours) to get that top rank. A one percent raise would be an extra $800, while two percent would be $1600. That works out to $6.53 to $13.06/hour of extra work. Granted that doesn’t take into consideration any improvement in pension benefits, but even if you assume a very generous 20% bonus that still works out to $7.83 to $15.67/hour well below $40/hour the person is making on their base salary.
So overall there isn’t much motivation to go the extra mile at my day job. What this did inspire me to think about was where then would you put your extra mile to get the most bang for the time put in? This then lead me to wonder a bit more about my long term goal to do more writing when I pull leave my day job around my 45th birthday. Why should I wait to work on building that business up? Doing it now would likely pay better than the extra effort at my day job and now that I’m working 80% time I have the time to consider doing something like that.
Perhaps the solution to leaving your day job isn’t just having enough investment income that you don’t need to work, but rather having enough income from other sources that you don’t need the day job. If you like working on something else that provides a stable income why shouldn’t you consider it as part of your plan going forward? Granted in my case, income from freelance writing and/or self publishing isn’t all that regular but if you build up a business to the point where you are getting fairly regular income over the course of two years you might be able to count on a portion of it.
That way over the long haul you are basically working yourself towards a full blown semi-retired situation where yes you are working, but on something you love. The rest of your income then would come from investments. Of course there are risks to a plan like this, but frankly so is expecting you to keep your current job for income. Overall I feel having income from investments and self employment could very well be less risky than full employment with a company over the long run.
So would you try to work yourself into a semi-retired scenario or are you too attached to the idea of full blown early retirement? Myself, I’m not really sure, but I’m now thinking about it.
Posted by Tim Stobbs on July 8, 2010
Perhaps one of the more under estimated decisions related to your retirement is knowing when you should quit working. People often just assume that once you have the money you will just instantly leave work the next day. Often this isn’t the case as money is only one part of your retirement.
Other equally valid factors to consider include:
- Health: Are you in good health when you retire? Or is poor health causing your problems at work? Do you have a condition that makes your work benefits especially useful? Or in the US, do you have affordable health insurance?
- Friends: Do you have any retired friends? Would you be the first to leave work? Are you ready to make new friends if need be?
- Family: Is your spouse ready to retire as well? Do your children or grandchildren really need your help right now?
- Career: Are you ready to leave work? Are you happy with where you will leave things? Or is there a project you want to see get finished?
- Hobbies: Are you starting a new hobby or just doing more of the old ones? Do you have all the equipment for your hobby? Do you want to try a few more hobbies before you have a reduced cash flow?
Yet despite all the factors in the world there will be just one question that will matter most: do you feel ready to retire? Notice I didn’t ask what you think, but rather what you feel. What is your gut telling you about this? If you feel a little nervous but still excited, it likely is a good choice. Yet on the other hand if you feel very nervous about it, you might want to wait a little while longer or perhaps cut back on working a slip into retirement more slowly.
Leaving work is a big decision so cut yourself some slack over worrying a bit about things. You are allowed that as long as you keep it reasonable. For example, worrying about investment returns for the next 20 years is worthless, but worrying about your asset allocation might be worth a second opinion. Focus on what you can control and plan for and let go of the rest.
Then one day you will wake up and realize with a fair amount of certainty: it is time to quit. That is when you know you are making the right choice as the doubt and the guilt vanish and you push into retirement with a big smile on your face.
So how do you think you will know when it is time to quit? Will you just follow the plan or perhaps just make it up as you go?
